**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**_____________________**

**FORM 10-Q**

**_____________________**

(Mark            One)

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                            SECURITIES EXCHANGE ACT OF 1934. |
|---|---------------------------------------------------------------------------------------------------------------------|

|   |  |
|--------|--|

|   | For the quarterly period ended September 30,                            2007 |
|--------|------------------------------------------------------------------------------|

OR

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                            SECURITIES EXCHANGE ACT OF 1934. |
|---|----------------------------------------------------------------------------------------------------------------------|

|   |  |
|--------|--|

|   | For the transition period from ______ to                            ______ |
|--------|----------------------------------------------------------------------------|

 

Commission File Number: 1-737

**Texas Pacific Land Trust**

(Exact Name of Registrant as Specified in Its Charter)

 

| **NOT APPLICABLE**

(State or Other Jurisdiction of Incorporation

or Organization)                                     |   | **75-0279735**

(I.R.S. Employer

Identification No.) |
|-------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------|
|                                                                                                                    |   |                                                  |
| **1700 Pacific Avenue, Suite 1670, Dallas,                            Texas**

(Address of Principal Executive Offices) |   | **75201**

(Zip Code)                                 |

 

**(214) 969-5530**

(Registrant’s Telephone Number, Including Area Code)

_________________________________________________________________

(Former Name, Former Address and Former Fiscal Year, if Changed Since            Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports            required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934            during the preceding 12 months (or for such shorter period that the registrant was            required to file such reports), and (2) has been subject to such filing requirements            for the past 90 days. YesxNoo

Indicate by check mark whether the registrant is a large accelerated            filer, an accelerated filer, or a non-accelerated filer. See definition of            “accelerated filer and large accelerated filer” in Rule 12b-2 of the            Exchange Act. (Check one):

| Large Accelerated Filer  o | Accelerated Filer  x | Non-Accelerated Filer  o |
|--------------------------------------|--------------------------------|------------------------------------|

             

Indicate by check mark whether the registrant is a shell company (as            defined in Rule 12b-2 of the Exchange Act). YesoNox

 

 

 

**Cautionary Statement Regarding Forward-Looking            Statements**

*Statements in this Quarterly Report on Form 10-Q that are not purely            historical are forward-looking statements within the meaning of Section 27A of the            Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,            including statements regarding management’s expectations, hopes, intentions or            strategies regarding the future. Forward-looking statements include statements            regarding the Trust’s future operations and prospects, the markets for real            estate in the areas in which the Trust owns real estate, applicable zoning regulations,            the markets for oil and gas, production limits on prorated oil and gas wells authorized            by the Railroad Commission of Texas, expected competition, management’s intent,            beliefs or current expectations with respect to the Trust’s future financial            performance and other matters. All forward-looking statements in this Report are based            on information available to us as of the date this Report is filed with the Securities            and Exchange Commission, and we assume no responsibility to update any such            forward-looking statements, except as required by law. All forward-looking statements            are subject to a number of risks, uncertainties and other factors that could cause our            actual results, performance, prospects or opportunities to differ materially from those            expressed in, or implied by, these forward-looking statements. These risks,            uncertainties and other factors include, but are not limited to, the factors discussed            in Item 1A “Risk Factors” of Part I of our Annual Report to the Securities            and Exchange Commission on Form 10-K for the year ended December 31, 2006, and in Part            I, Item 2 “Management’s Discussion and Analysis of Financial Condition and            Results of Operations” and Part II, Item 1A “Risk Factors” of this            Quarterly Report on Form 10-Q.*

 

 

**PART I. FINANCIAL INFORMATION**

| **Item 1.** | **Financial Statements** |
|-------------|--------------------------|

**TEXAS PACIFIC LAND TRUST**

**BALANCE SHEETS**

 
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | September 30,                        2007 | December 31,                        2006 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------|------------------------------------------|
||
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Cash and                    cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                |                                      |                                     | $ | 8,602,592 |   | $ | 8,524,177 |   |
| Accrued                    receivables                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                      |                                     |   | 1,626,630 |   |   | 1,154,605 |   |
| Other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                      |                                     |   | 9,217 |   |   | 92,169 |   |
| Federal income taxes                    receivable                                                                                                                                                                                                                                                                                                                                                                                                                          |                                      |                                     |   | 13,470 |   |   | - |   |
| Notes receivable for                    land sales                                                                                                                                                                                                                                                                                                                                                                                                                          |                                      |                                     |   | 20,135,589 |   |   | 20,802,132 |   |
| Water wells, leasehold                    improvements, furniture and equipment                          - at cost less accumulated                    depreciation                                                                                                                                                                                                                                                                           |                                      |                                     |   | 125,905 |   |   | 117,458 |   |
| Real estate                    acquired:                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                      |                                     |
|        (10,153                    acres at September 30, 2007 and 10,565 acres at December 31, 2006)                                                                                                                                                                                                                                                                                                                                     |                                      |                                     |   | 1,083,552 |   |   | 1,777,007 |   |
| Real estate and royalty                    interests assigned through the 1888                       Declaration of Trust, no value assigned:                                                                                                                                                                                                                                                                                                                |                                      |                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|       Land                    (surface rights) situated in twenty counties in                             Texas - 954,700 acres in                    2007 and 955,827 acres in 2006                                                                                                                                                                                                             |                                      |                                     |   | - |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|       Town                    lots in Iatan, Loraine and Morita - 628 lots in 2007 and 2006                                                                                                                                                                                                                                                                                                                                                   |                                      |                                     |   | - |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        1/16                    nonparticipating perpetual royalty interest in 386,988 acres in 2007                              and                    2006                                                                                                                                                                                                                           |                                      |                                     |   | - |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        1/128                    nonparticipating perpetual royalty interest in 85,414 acres in 2007                              and                    2006                                                                                                                                                                                                                           |                                      |                                     |   | - |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                           |                                          |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                      |                                     | $ | 31,596,955 |   | $ | 32,467,548 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                           |                                          |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **LIABILITIES AND                    CAPITAL**                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Accounts payable and                    accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                 |                                      |                                     | $ | 873,018 |   | $ | 653,733 |   |
| Federal income taxes                    payable                                                                                                                                                                                                                                                                                                                                                                                                                             |                                      |                                     |   | - |   |   | 213,780 |   |
| Other taxes                    payable                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                      |                                     |   | 162,309 |   |   | 57,800 |   |
| Unearned                    revenues                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                      |                                     |   | 428,980 |   |   | 415,060 |   |
| Deferred                    taxes                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                      |                                     |   | 5,984,210 |   |   | 6,408,682 |   |
| Pension plan                    liability                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                      |                                     |   | 343,512 |   |   | 279,091 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                           |                                          |  |  |
|         Total                    liabilities                                                                                                                                                                                                                                                                                                                                                                                        |                                      |                                     |   | 7,792,029 |   |   | 8,028,146 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                           |                                          |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                      |                                     |
|       Certificates                    of Proprietary Interest, par value $100                            each; outstanding 0                    certificates                                                                                                                                                                                                                                          |                                      |                                     |   | - |   |   | - |   |
|       Sub-share                    Certificates in Certificates of Proprietary                            Interest, par value $.03 1/3                    each; outstanding:                            10,513,075 Sub-shares in 2007                    and 10,612,875                            Sub-shares in 2006 |                                      |                                     |   | - |   |   | - |   |
|       Other                    comprehensive income                                                                                                                                                                                                                                                                                                                                                                                           |                                      |                                     |   | (321,430 | ) |   | (336,788 | ) |
|       Net                    proceeds from all sources                                                                                                                                                                                                                                                                                                                                                                                        |                                      |                                     |   | 24,126,356 |   |   | 24,776,190 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                           |                                          |  |  |
|         Total                    capital                                                                                                                                                                                                                                                                                                                                                                                            |                                      |                                     |   | 23,804,926 |   |   | 24,439,402 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                           |                                          |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                      |                                     | $ | 31,596,955 |   | $ | 32,467,548 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                           |                                          |  |  |

 

See            accompanying notes to financial statements.

 

|   | 1 |
|--------|---|

 

**TEXAS PACIFIC LAND TRUST**

**STATEMENTS OF INCOME**

**(Unaudited)**

 
|                                                                                                                                     | Three Months Ended                        September 30, | Nine Months Ended                        September 30, |
|-------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------|--------------------------------------------------------|
||
| Income:                                                                                                                             |                                                    |                                                   |   |  |   |   |  |   |   |  |   |   |  |   |
|      Rentals,                    royalties and sundry income                                               |                                                    |                                                   | $ | 2,785,644 |   | $ | 3,408,609 |   | $ | 8,385,051 |   | $ | 10,291,694 |   |
|      Land                    sales                                                                         |                                                    |                                                   |   | 1,857,664 |   |   | 907,456 |   |   | 1,857,664 |   |   | 1,623,573 |   |
|      Interest                    income from notes receivable                                              |                                                    |                                                   |   | 365,460 |   |   | 319,567 |   |   | 1,105,006 |   |   | 994,820 |   |
|                                                                                                                                     |                                                         |                                                        |  |  |  |  |  |  |
|                                                                                                                                |                                                    |                                                   |   | 5,008,768 |   |   | 4,635,632 |   |   | 11,347,721 |   |   | 12,910,087 |   |
|                                                                                                                                     |                                                         |                                                        |  |  |  |  |  |  |
| Expenses:                                                                                                                           |                                                    |                                                   |
|      Taxes,                    other than Federal income taxes                                             |                                                    |                                                   |   | 159,356 |   |   | 161,451 |   |   | 500,794 |   |   | 516,489 |   |
|      Basis in                    real estate sold                                                          |                                                    |                                                   |   | 693,454 |   |   | - |   |   | 693,454 |   |   | 61,318 |   |
|      General and                    administrative expenses                                                |                                                    |                                                   |   | 573,478 |   |   | 462,955 |   |   | 1,746,705 |   |   | 1,431,619 |   |
|                                                                                                                                     |                                                         |                                                        |  |  |  |  |  |  |
|                                                                                                                                |                                                    |                                                   |   | 1,426,288 |   |   | 624,406 |   |   | 2,940,953 |   |   | 2,009,426 |   |
|                                                                                                                                     |                                                         |                                                        |  |  |  |  |  |  |
|              Operating                    income                   |                                                    |                                                   |   | 3,582,480 |   |   | 4,011,226 |   |   | 8,406,768 |   |   | 10,900,661 |   |
|      Interest                    income earned from investments                                            |                                                    |                                                   |   | 76,064 |   |   | 166,907 |   |   | 283,008 |   |   | 403,698 |   |
|                                                                                                                                     |                                                         |                                                        |  |  |  |  |  |  |
|              Income                    before Federal income taxes |                                                    |                                                   |   | 3,658,544 |   |   | 4,178,133 |   |   | 8,689,776 |   |   | 11,304,359 |   |
| Federal income                    taxes                                                                                             |                                                    |                                                   |   | 1,123,409 |   |   | 1,320,431 |   |   | 2,611,077 |   |   | 3,534,719 |   |
|                                                                                                                                     |                                                         |                                                        |  |  |  |  |  |  |
|          Net                    income                                                 |                                                    |                                                   | $ | 2,535,135 |   | $ | 2,857,702 |   | $ | 6,078,699 |   | $ | 7,769,640 |   |
|                                                                                                                                     |                                                         |                                                        |  |  |  |  |  |  |
| Average number of                    sub-share certificates                                                                         |                                                    |                                                   |
|      and                    equivalent sub-share certificates                                              |                                                    |                                                   |
|      outstanding                                                                                           |                                                    |                                                   |   | 10,530,958 |   |   | 10,700,875 |   |   | 10,559,717 |   |   | 10,732,653 |   |
|                                                                                                                                     |                                                         |                                                        |  |  |  |  |  |  |
| Basic and dilutive                    earnings per sub-share certificate                                                            |                                                    |                                                   | $ | .24 |   | $ | .27 |   | $ | .58 |   | $ | .72 |   |
|                                                                                                                                     |                                                         |                                                        |  |  |  |  |  |  |
| Cash dividends per                    sub-share certificate                                                                         |                                                    |                                                   | $ | - |   | $ | - |   | $ | .16 |   | $ | .13 |   |
|                                                                                                                                     |                                                         |                                                        |  |  |  |  |  |  |

 

 

See            accompanying notes to financial statements.

 

|   | 2 |
|--------|---|

 

**TEXAS PACIFIC LAND TRUST**

**STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
|                                                                                                                                                                                                                                                                                                                                                                                                                                             | Nine Months                        Ended September 30, |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|
||
| Cash flows                    from operating activities:                                                                                                                                                                                                                                                                                                                                                                                    |                                                   |   |   |  |   |   |  |   |
|      Net                    income                                                                                                                                                                                                                                                                                                                                                                                 |                                                   |   | $ | 6,078,699 |   | $ | 7,769,640 |   |
|      Adjustments                    to reconcile net income to net                                                                                                                                                                                                                                                                                                                                                 |                                                   |   |
|        cash                    provided by operating activities:                                                                                                                                                                                                                                                                                                                                         |                                                   |   |
|          Deferred                    taxes                                                                                                                                                                                                                                                                                                                                                     |                                                   |   |   | (424,472 | ) |   | (525,957 | ) |
|          Depreciation                    and amortization                                                                                                                                                                                                                                                                                                                                      |                                                   |   |   | 26,100 |   |   | 21,600 |   |
|          Changes                    in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                       |                                                   |   |
|            Accrued                    receivables and other assets                                                                                                                                                                                                                                                                                                                   |                                                   |   |   | (389,073 | ) |   | (18,083 | ) |
|            Real                    estate acquired                                                                                                                                                                                                                                                                                                                                   |                                                   |   |   | 693,455 |   |   | 61,318 |   |
|            Notes                    receivable for land sales                                                                                                                                                                                                                                                                                                                        |                                                   |   |   | 666,543 |   |   | 1,620,953 |   |
|            Accounts                    payable, accrued expenses                                  and                    other liabilities                                                                                                                                                                     |                                                   |   |   | 417,493 |   |   | 252,014 |   |
|            Federal                    income taxes payable                                                                                                                                                                                                                                                                                                                           |                                                   |   |   | (227,250 | ) |   | 620,676 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                        |  |  |  |
|                            Net                    cash provided by operating activities                                                                                                                                                                                                              |                                                   |   |   | 6,841,495 |   |   | 9,802,161 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                        |  |  |  |
| Cash flows from                    investing activities:                                                                                                                                                                                                                                                                                                                                                                                    |                                                   |   |
|      Purchase of                    fixed assets                                                                                                                                                                                                                                                                                                                                                                   |                                                   |   |   | (34,547 | ) |   | (55,611 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                        |  |  |  |
|                            Net                    cash used in investing activities                                                                                                                                                                                                                  |                                                   |   |   | (34,547 | ) |   | (55,611 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                        |  |  |  |
| Cash flows from                    financing activities:                                                                                                                                                                                                                                                                                                                                                                                    |                                                   |   |
|      Purchase of                    Sub-share Certificates in Certificates of                           Proprietary Interest                                                                                                                                                                                                                                                    |                                                   |   |   | (5,031,753 | ) |   | (3,645,040 | ) |
|      Dividends                    paid                                                                                                                                                                                                                                                                                                                                                                             |                                                   |   |   | (1,696,780 | ) |   | (1,400,994 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                        |  |  |  |
|                            Net                    cash used in financing activities                                                                                                                                                                                                                  |                                                   |   |   | (6,728,533 | ) |   | (5,046,034 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                        |  |  |  |
|                            Net                    increase in cash and cash                                                   equivalents |                                                   |   |   | 78,415 |   |   | 4,700,516 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Cash and cash                    equivalents at beginning of period                                                                                                                                                                                                                                                                                                                                                                         |                                                   |   |   | 8,524,177 |   |   | 9,626,984 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                        |  |  |  |
| Cash and cash                    equivalents at end of period                                                                                                                                                                                                                                                                                                                                                                               |                                                   |   | $ | 8,602,592 |   | $ | 14,327,500 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                        |  |  |  |

             

See            accompanying notes to financial statements.

 

 

 

|   | 3 |
|--------|---|

 

**TEXAS PACIFIC LAND TRUST**

 

**NOTES TO UNAUDITED FINANCIAL STATEMENTS**

 

**SEPTEMBER 30, 2007**

| (1) | In the opinion of management, the accompanying unaudited                            financial statements contain all adjustments (consisting of only normal                            recurring accruals) necessary to present fairly the financial position                            of Texas Pacific Land Trust (the “Trust”) as of September                            30, 2007 and the results of its operations for the three month and nine                            month periods ended September 30, 2007 and 2006, respectively, and its                            cash flows for the nine month periods ended September 30, 2007 and                            2006, respectively. The financial statements and footnotes included                            herein should be read in conjunction with the Trust’s annual                            financial statements as of December 31, 2006 and 2005 and for each of                            the years in the three year period ended December 31, 2006 included in                            the Trust’s Annual Report on Form 10-K for the year ended                            December 31, 2006. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | No value has been assigned to the land held by the Trust                            other than parcels which have been acquired through foreclosure and a                            limited number of parcels which have been acquired because they were                            offered for sale and were contiguous to parcels already owned by the                            Trust. Consequently, no allowance for depletion is computed, and no                            charge to income is made, with respect thereto, and no cost is deducted                            from the proceeds of the land sales in computing gain or loss                            thereon. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The Sub-shares and the Certificates of Proprietary                            Interest are freely interchangeable in the ratio of one Certificate of                            Proprietary Interest for 3,000 Sub-shares or 3,000 Sub-shares for one                            Certificate of Proprietary Interest. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | The Trust’s effective Federal income tax rate is                            less than the 34% statutory rate because taxable income is reduced by                            statutory percentage depletion allowed on mineral royalty                            income. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | The results of operations for the three month and nine                            month periods ended September 30, 2007 are not necessarily indicative                            of the results to be expected for the full year. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | The Trust invests cash in excess of daily requirements                            primarily in a savings account and U. S. Treasury bills with maturities                            of ninety days or less. Such investments are deemed to be highly liquid                            debt instruments and classified as cash equivalents for purposes of the                            statements of cash flows. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Supplemental cash flow information for the nine month periods ended            September 30, 2007 and 2006 is summarized as follows:

             

|                      | 2007       |   | 2006       |
|---------------------------|------------|--------|------------|
|                      |       |   |       |
| Federal income taxes paid | $3,271,068 |   | $3,440,000 |

             

| (7) | SFAS No. 131,                            “*Disclosures about Segments of an                            Enterprise and Related Information*”                            establishes standards for the way public business enterprises are to                            report information about operating segments. SFAS No. 131 utilizes the                            management approach as a basis for identifying reportable segments. The                            management approach is based on the way that management organizes the                            segments within the enterprise for making operating decisions and                            assessing performance. The Trust’s management views its                            operations as one segment and believes the only significant activity is                            managing the land which was conveyed to the Trust in 1888. The                            Trust’s management makes decisions about resource allocation and                            performance assessment based on the same |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | 4 |
|--------|---|

 

financial information presented in these financial statements. Managing            the land includes sales and leases of such land, and the retention of oil and gas            royalties.

| (8) | On June 20, 2007, the Trustees of the Trust authorized a                            five-for-one split of its Sub-share certificates. The additional                            Sub-shares resulting from the split were distributed on July 12, 2007.                            Sub-share and per Sub-share amounts reflected throughout the unaudited                            financial statements and the notes thereto have been retroactively                            adjusted for the split. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Item 2.** | **Management’s Discussion and Analysis of                            Financial Condition and Results of Operations** |
|-------------|----------------------------------------------------------------------------------------------------------------------------|

*The following discussion and analysis should be read together with            (i) the factors discussed in Item 1A “Risk Factors” of Part I of our Annual            Report to the Securities and Exchange Commission on Form 10-K for the year ended            December 31, 2006, (ii) the factors discussed in Part II, Item 1A “Risk            Factors,” if any, of this Quarterly Report on Form 10-Q and (iii) the Financial            Statements, including the Notes thereto, and the other financial information appearing            elsewhere in this Report. Period-to-period comparisons of financial data are not            necessarily indicative, and therefore should not be relied upon as indicators, of the            Trust’s future performance. Words or phrases such as “does not            believe” and “believes”, or similar expressions, when used in this            Form 10-Q or other filings with the Securities and Exchange Commission, are intended to            identify “forward-looking statements” within the meaning of the Private            Securities Litigation Reform Act of 1995.*

**Results of Operations for the Quarter Ended September 30, 2007            Compared to the Quarter Ended September 30, 2006**

Earnings per sub-share certificate were $.24 for the third quarter of            2007 compared to $.27 for the third quarter of 2006. Total operating and investing            revenues were $5,084,832 for the third quarter of 2007 compared to $4,802,539 for the            third quarter of 2006, an increase of 5.9%. This increase in revenue was due primarily            to an increase in land sales during the third quarter of 2007 compared to the third            quarter of 2006 which more than offset a decline in rentals, royalties and sundry            income.

In the third quarter of 2007, land sales totaled $1,857,664,            representing the sale of 1,539 acres at an average price of approximately $1,207 per            acre. In the comparable period of 2006, land sales totaled $907,456, representing the            sale of 890 acres at an average price of approximately $1,020 per acre.

Rentals, royalties and sundry income were $2,785,644 for the third            quarter of 2007 compared to $3,408,609 for the third quarter of 2006, a decrease of            18.3%. This decrease resulted primarily from a decrease in sundry income and, to a            lesser extent, a decrease in gas royalty revenue, which more than offset a modest            increase in oil royalty revenue. The decrease in sundry revenue was attributable to            decreased seismic activity.

Oil and gas royalty revenue was $2,189,938 for the third quarter of            2007, compared to $2,141,586 for the third quarter of 2006, an increase of 2.3%. Oil            royalty revenue was $1,622,151 for the third quarter of 2007, an increase of 3.7% from            the third quarter of 2006. Crude oil production subject to the Trust’s royalty            interest increased 8.9% in the third quarter of 2007, and this increase in the volume            of production more than offset a 4.7% decrease in the average price per royalty barrel            of crude oil in the 2007 third quarter compared to the 2006 third quarter. Gas royalty            revenue was $567,787 for the third quarter of 2007, a decrease of 1.5% from the third            quarter of 2006. This decrease resulted from a decrease of 17.7% in the volume of gas            produced, which was only partially offset by a price increase of 19.6%.

Easement and sundry income was $487,661 for the third quarter of 2007, a            decrease of 57.6% from the third quarter of 2006. The decrease in sundry income was            primarily attributable to decreased seismic activity. This category of income is            unpredictable and may vary significantly from quarter to quarter.

 

|   | 5 |
|--------|---|

 

Interest revenue was $441,524 for the third quarter of 2007 compared to            $486,474 for the third quarter of 2006, a decrease of 9.2%. Interest income is            comprised of interest on notes receivable from land sales and sundry interest from            short term investments of cash on hand. Interest on notes receivable was $365,460 for            the third quarter of 2007 compared to $319,567 for the third quarter of 2006, an            increase of 14.4%. As of September 30, 2007 notes receivable were $20,135,589 compared            to $17,462,895 at September 30, 2006, an increase of 15.3%. Sundry interest was $76,064            for the third quarter of 2007 compared to $166,907 for the third quarter of 2006, a            decrease of 54.4%. Sundry interest fluctuates based on cash on hand for investment and            interest rates on short term investments.

Taxes, other than Federal income taxes decreased 1.3% for the third            quarter of 2007 compared to the third quarter of 2006.

General and administrative expenses for the third quarter of 2007 were            $573,478 compared to $462,955 during the third quarter of 2006, an increase of 23.9%.            This was largely due to an increase in legal and professional fees.

**Results of Operations for the Nine Months Ended September 30, 2007            Compared to the Nine Months Ended September** **30, 2006**

Earnings per sub-share certificate were $.58 for the first nine months            of 2007 compared to $.72 for the first nine months of 2006. Total operating and            investing revenues were $11,630,729 for the first nine months of 2007 compared to            $13,313,785 for the first nine months of 2006, a decrease of 12.6%. This decrease in            revenue and earnings was due primarily to a decrease in sundry income and, to a lesser            extent, gas royalty revenue, which were only partially offset by increases in oil            royalty revenue and revenue from land sales. The decrease in sundry income resulted            primarily from the inclusion in the first nine months of 2006 of a one-time payment            received by the Trust from an oil company in settlement of a claim by the Trust for            damages to property leased by the Trust to the oil company which was not repeated in            the comparable period of 2007.

In the first nine months of 2007, land sales totaled $1,857,664,            representing the sale of 1,539 acres at an average price of approximately $1,207 per            acre. In the comparable period of 2006, land sales totaled $1,623,573, representing the            sale of 4,269 acres at an average price of approximately $380 per acre.

Rentals, royalties, and sundry income were $8,385,051 for the first nine            months of 2007 compared to $10,291,694 for the first nine months of 2006, a decrease of            18.5%. This decrease resulted primarily from decreases in sundry income and gas royalty            revenue which were only partially offset by an increase in oil royalty revenue. The            decrease in sundry income resulted primarily from the inclusion in the first nine            months of 2006 of a one-time payment received by the Trust from an oil company in            settlement of a claim by the Trust for damages to property leased in the comparable            period of 2007.

Oil and gas royalty revenue was $6,853,638 for the first nine months of            2007 compared to $6,696,246 for the first nine months of 2006, an increase of 2.4%. Oil            royalty revenue was $5,016,121 for the first nine months of 2007, an increase of 11.6%            from the first nine months of 2006. Crude oil production subject to the Trust’s            royalty interest increased 18.3% in the first nine months of 2007, which more than            offset a 5.7% decrease in the average price per royalty barrel of crude oil in the            first nine months of 2007 compared to the first nine months of 2006. Gas royalty            revenue was $1,837,517 for the first nine months of 2007, a decrease of 16.5% from the            first nine months of 2006. This decrease in gas royalty revenue resulted from a            decrease of 28.4% in the volume of gas produced during the first nine months of            2007 compared to the first nine months of 2006, which more than offset a 16.6%            increase in the average price of gas sold in the 2007 period. The increase in oil and            gas royalties during the first nine months of 2007 was also impacted by the inclusion            in the first nine months of 2007 of $265,506 due to settlements with oil companies over            royalties due.

 

|   | 6 |
|--------|---|

 

Easement and sundry income was $1,159,092 for the first nine months of            2007 compared to $3,212,620 for the first nine months of 2006, a decrease of 63.9%. The            decrease in sundry income resulted primarily from the inclusion in the first nine            months of 2006 of a one-time payment in the amount of $1,308,000 received by the Trust            from an oil company in settlement of a claim by the Trust for damages to property            leased to the oil company by the Trust which was not repeated during the comparable            period of 2007. This category of income is unpredictable and may vary significantly            from period to period.

Interest revenue was $1,388,014 for the first nine months of 2007            compared to $1,398,518 for the first nine months of 2006, or essentially flat. Interest            income is comprised of interest on notes receivable from land sales and sundry interest            from short term investments of cash on hand. Interest on notes receivable for the first            nine months of 2007 was $1,105,006, an increase of $110,186, or 11.1%, from the            comparable period of 2006. As of September 30, 2007, notes receivable from land sales            were $20,135,589 compared to $17,462,895 at September 30, 2006, an increase of 15.3%.            Sundry interest was $283,008 for the first nine months of 2007, a decrease of 29.9%            from the first nine months of 2006. Sundry interest income fluctuates based on cash on            hand for investment and interest rates on short term investments.

Taxes, other than Federal income taxes, decreased 3.0% for the first            nine months of 2007 compared to the first nine months of 2006. This decrease is            attributable to decreases in ad valorem taxes and oil and gas production            taxes.

General and administrative expenses increased 22.0% for the first nine            months of 2007 compared to the first nine months of 2006, primarily due to increases in            legal and professional fees and, to a lesser extent, audit fees.

**Liquidity and Capital Resources**

The Trust’s principal sources of liquidity are revenues from oil            and gas royalties, lease rentals and receipts of interest and principal payments on the            notes receivable arising from land sales. In the past, those sources have generated            more than adequate amounts of cash to meet the Trust’s needs and, in the opinion            of management, should continue to do so in the foreseeable future.

On June 20, 2007, the Trustees of the Trust authorized a five-for-one            split of its Sub-share certificates. The additional Sub-shares resulting from the split            were distributed on July 12, 2007 to holders of record on July 2, 2007.

| **Item 3.** | **Quantitative and Qualitative Disclosures About Market                            Risk** |
|-------------|-------------------------------------------------------------------------------------------|

There have been no material changes in the information related to market            risk of the Trust since December 31, 2006.

| **Item 4.** | **Controls and Procedures** |
|-------------|-----------------------------|

Pursuant to Rule 13a-15, management of the Trust under the supervision            and with the participation of Roy Thomas, the Trust’s Chief Executive Officer,            and David M. Peterson, the Trust’s Chief Financial Officer, carried out an            evaluation of the effectiveness of the design and operation of the Trust’s            disclosure controls and procedures as of the end of the Trust’s fiscal quarter            covered by this Report on Form 10-Q. Based upon that evaluation, Mr. Thomas and Mr.            Peterson concluded that the Trust’s disclosure controls and procedures are            effective in timely alerting them to material information relating to the Trust            required to be included in the Trust’s periodic SEC filings.

 

|   | 7 |
|--------|---|

 

There have been no changes in the Trust’s internal control over            financial reporting during the Trust’s most recently completed fiscal quarter            that have materially affected, or are reasonably likely to materially affect, the            Company’s internal control over financial reporting.

**PART II**

**OTHER INFORMATION**

**Item 1A. Risk Factors**

There have been no material changes in the risk factors previously            disclosed in response to Item 1A “Risk Factors” of Part I of the            Trust’s Annual Report to the Securities and Exchange Commission on Form 10-K for            the year ended December 31, 2006.

| **Item 2.** | **UnregisteredSales of Equity                            Securities and Use of Proceeds** |
|-------------|-------------------------------------------------------------------------------------------|

| (c) | During the third quarter of 2007, the Trust repurchased                            Sub-share certificates as follows: |
|-----|-----------------------------------------------------------------------------------------------------------------------|

             

| **Period**                              |   | **Total Number of Sub-shares                                Purchased** | **    Average Price**

**Paid per Sub-share** | **Total**

**Number of Sub-shares Purchased as Part                            of**

**Publicly Announced Plans or****Programs** | **Maximum****Number (or Approximate Dollar Value) of                                Sub-shares that May Yet Be Purchased Under the Plans or                                Programs** |
|-----------------------------------------|--------|-------------------------------------------------------------------------|-------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| July 1, through July 31, 2007           |   | 21,800                                                                  | $58.39                                                            | –                                                                                                                          | –                                                                                                                                                                               |
| August 1, through August 31, 2007       |   | 16,500                                                                  | $52.75                                                            | –                                                                                                                          | –                                                                                                                                                                               |
| September 1, through September 30, 2007 |   | 6,000                                                                   | $49.10                                                            | –                                                                                                                          | –                                                                                                                                                                               |
| Total                                   |   | 44,300*                                                                 | $54.42                                                            | –                                                                                                                          | –                                                                                                                                                                               |

 

*            The Trust purchased and retired 44,300 Sub-shares in the open market.

**Item 6. Exhibits**

|   | 31.1 | Rule 13a-14(a) Certification of Chief Executive                            Officer. |
|--------|------|-------------------------------------------------------------------------------------|

|   | 31.2 | Rule 13a-14(a) Certification of Chief Financial                            Officer. |
|--------|------|-------------------------------------------------------------------------------------|

|   | 32.1 | Certification of Chief Executive Officer furnished                            pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | 8 |
|--------|---|

 

|   | 32.2 | Certification of Chief Financial Officer furnished                            pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | 9 |
|--------|---|

 

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the            registrant has duly caused this report to be signed on its behalf by the undersigned            thereunto duly authorized.

 

|                   |   | TEXAS PACIFIC LAND TRUST |
|------------------------|--------|--------------------------|
|                   |   | (Registrant)             |
| Date: November 8, 2007 |   | By:                 |   /s/ Roy Thomas |
|                   |   |                     | Roy Thomas, General Agent,Authorized Signatory and Chief ExecutiveOfficer |

 

 

|                   |   |      |
|------------------------|--------|-----------|
| Date: November 8, 2007 |   | By:  |   /s/ David M. Peterson |
|                   |   |      | David M. Peterson, Assistant General Agent,and Chief Financial Officer |

 

 

 

|   | 10 |
|--------|----|

 

**INDEX TO EXHIBITS**

 

| **EXHIBIT**

**NUMBER** | **DESCRIPTION**                                                                                                                          |
|-------------------------|------------------------------------------------------------------------------------------------------------------------------------------|
|                    |                                                                                                                                     |
| 31.1                    | Rule 13a-14(a) Certification of Chief Executive                            Officer.                                                      |
|                    |                                                                                                                                     |
| 31.2                    | Rule 13a-14(a) Certification of Chief Financial                            Officer.                                                      |
|                    |                                                                                                                                     |
| 32.1                    | Certification of Chief Executive Officer furnished                            pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|                    |                                                                                                                                     |
| 32.2                    | Certification of Chief Financial Officer furnished                            pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|                    |                                                                                                                                     |

 

 

|   | 11 |
|--------|----|